Correspondent banking in Brazil

Correspondent banking in Brazil

Social Performance &

Outcome Assessment

Presentation Outline• Context• Objective• Performance of commercial banks and their CB operations

– Social, Environmental, Economic• Outcome assessment of CB services on :

– Clients– CB Operators– Local economy

• Methodology• Indicators• Next steps

Context• Correspondent banking in Brazil

• INSERT DESCRIPTION OF CB AND THE SERVICES THEY OFFER

Objective1. Identify indicators to measure :

– The Social, Environmental and Economic Performance of commercial banks and their CB operations

– The Outcome of CB services on :a) Clients b) CB Operatorsc) Local economy

2. Determine the methodology to obtain the data annually

Performance of commercial banks and their CB operations

• Access : intent and outreach• Cost and quality of services• Information transparency

• GHG emissions• Water consumption• Waste management

• Profitability of CB operations• Growth of CB offering

Social Performance

Measuring the social performance : Access

Dimension Key question Indicators

Intent • Do CB services have the objective to reach a social goal?

• Corporate policy or strategy to meet social objectives through CB

Breadth of outreach

• What portion of the population served?• How many clients are being served?• How many are in rural areas?• How many are women?

• # of CB/municipality• # of CB/habitants or # habitants/CB• # of unique accounts/population• # of active clients/population• Geographic distribution of clients• # women clients/total clients• # of different services offered

Depth of outreach • How poor are the clients? (based on national poverty line)

• National poverty line• # poor clients/total clients• Avg. amount of bills paid/month• Avg. benefit payment value• Avg. savings balance• Avg. loan size

Source: CGAP and The Social Performance Task Force

Social Performance

Measuring the social performance : Services

Dimension Key question Indicators

Cost • How much are the clients being charged for the services?

• Avg. fee per transaction• Real interest rates of loans

Quality • Are clients being offered a variety of services?• Are the services designed to meet clients’ needs?•Is the bank committed to providing quality services (or to improving the quality)

• # of different services offered/client• % all services• % bill payment only• % savings and payment• etc.

• Client participation in product development• Client services policy• Client feedback mechanism

Information transparency

• Are the cost of the services explained clearly to the clients?

• Transparency policy• Access to clear and up to date information on pricing• Financial education programs• Annual report

Source: The Social Performance Task Force

Environmental Performance

Measuring the environmental performance

Dimension Key question Indicators

GHG emissions

Waste management

Water consumption

Other

Economic Performance

Measuring the economic performance

Dimension Key question Indicators

Profitability

Growth

Other

Outcome assessment of CB services

•Longevity as a CB•Profitability•Benefits on other part of the business

• Impact on local businesses•Taxes raised•Other benefits

DimensionsTarget

Outcome assessment of CB services

Clients Operators Local economy

Survey (Stratified randomization)

SurveySecondary data : central bank and PROCON

Interviews with local officialsSecondary data (baseline + progress)

Pilot in one geographic region Pilot in one geographic region Pilot in one geographic region

Risks : self-selection bias, non-respondent bias, reporting bias, interviewer bias

Risks : self-selection bias, non-respondent bias, reporting bias, interviewer bias

Risks : reporting bias, interviewer bias, availability of data

Methodology

Outcome assessment of CB services

Clients Indicators

CLIENTS

Dimension Key question Indicators

Access to finance • What kind of financial services does the CB client have access to?

• # of active bank accounts, by type• # of active loans, and reason for each loan (consumption, business, mortgage)• # of other CB services used in typical month

Over-indebtedness • Is the client over-indebted? • # of instalment missed on active loans

Financial education

• Does the client with a loan know the real interest rate being charged?

• Ability to state the real interest rate on loan or cost of loan

Satisfaction level • Is the client satisfied with the services :• Service• Hours of operations• Availability of funds• Transparency• Other…

• Satisfaction level (scale of 1 to 10)

Fraud • Has the client encountered fraudulent behaviour from a CB?

• Additional payment required• Spending on premises required

• # of times that a fraudulent behaviour occurred in the last year

Outcome assessment of CB services

Clients Indicators

CLIENTS (cont’d)

Dimension Key question Indicators

Income • Is the client employed or self-employed?• Has the income level of the clients improved?

• Employment status / sources of income•Annual income

Assets • Does the household have assets? • House, land, cattle, car, savings etc.

Living conditions • Have living conditions improved ? • Home improvements (walls, roof, floor)• Toilets, stove, refrigerator, TV

Health & nutrition • Has the family health improved? • # of meals with protein/week

Children’s education

• Do all boys 6-14 go to school?• Do all girls 6-14 go to school?

• # of children aged 6-14• # of boys, girls that go to school

Women’s conditions

• Has the woman’s economic independence risen? Education? Literacy?

• Access to services• Economic participation• Education level and literacy rate

Time/$ saved • Has access to a CB reduced the time and cost required to do a financial transaction?

• Time saved since use of CB• Money saved since use of CB

Local spending • Has access to a CB led the client to spend more locally?

• Money spent with local retailers/month• Money spent in other cities/month•# of trips to other cities to purchase goods or services/month

Outcome assessment of CB services

Clients Indicators

CB OPERATORS

Dimension Key question Indicators

Longevity • How long has the CB been in operation? • Months of operations

Profitability • Is the CB generating a return for the operator?

• Cost/revenue•Total revenue received(commission, fees)•Total operating costs(electricity, salaries etc.)

• Increase in staff since CB

Services offered • What type of services does the CB offer? • Financial services offered

Credit demand • What percentage of loans are approved? • # of loan applications received in last quarter• # of loans approved/refused/in process in last quarter

Other benefits • What kind of spill over effects does the CB business bring to the operators

• Increase in patronage• Increase in revenues other than CB revenues• Other benefits / negative effects

Outcome assessment of CB services

Clients Indicators

LOCAL ECONOMY

Dimension Key question Indicators

Impact on local businesses

COMMUNITY WITH A CB :• Have there been new businesses created since the introduction of the CB?

COMMUNITY WHERE A CB CLOSED OR OPENED IN OTHER COMMUNITY (Novo Ceu) :• Have there been businesses that have closed after the CB ceased to operate?

• # of businesses created (formal and informal)

• # of businesses closed (formal and informal)

Taxes • Did the municipality see revenues from businesses taxes grow? Decrease?

• Taxes raised in the municipality

Other effects • Has the municipality benefited in other ways?• Has the municipality suffered in other ways?

• Sense of community• Pride

Next steps• Refine the data gathering methodology for the outcome assessment• Develop the questionnaires for the three target groups• Conduct a pilot to test the questionnaire and the methodology